Animals that matter may be better off not existing than living in suffering. Cows having greater moral worth might be exactly that which means you would rather not create and torment them, as opposed to insects.
On the other hand, see http://foundational-research.org/publications/importance-of-wild-animal-suffering/ , which argues that insects have lives with negative value because of suffering. In that case, World 2 is strictly worse than world 1: fewer cows (who do have lives with value) and more insects (whose lives have negative value).
I think it's past time for another Stupid Questions thread, so here we go.
This thread is for asking any questions that might seem obvious, tangential, silly or what-have-you. Please respect people trying to fix any ignorance they might have, rather than mocking that ignorance.